Fixing The School Consolidation Law

(from Maine Townsman, May 2008)
Geoff Herman, Director of State & Federal Relations, MMA

One of the final enactments this legislative session was a package of changes designed to fix some of the major problems associated with the school consolidation law enacted in 2007.

The irony is that it was supposed to be one of this Legislature's very first enactments in January. Not only was it scheduled to be enacted right out of the gate, it was supposed to be strongly supported as "emergency" legislation in order to immediately remove legislatively-created barriers to school reorganization and keep the consolidation program on track.

In hindsight, the goal to fast-track this legislation looks naïve. Many legislators want to repeal the school consolidation law altogether, and fixing the disliked law would not help achieve that end. At the other end of the ideological spectrum, a few legislators resisted sweeping changes to the 2007 school consolidation law because they didn't want to "weaken" what they consider to be good public policy.

As sometimes happens with public policy issues that generate strong and very divisive opinion, the arch opponents and the arch supporters will both react negatively  -- for very different reasons - to middle-ground compromise. That was the political dynamic that frustrated the process of fixing the very imperfect 2007 school consolidation law. It was a big game of chicken. Everyone drove their hot rods to the edge of the cliff…but no one drove over and the compromise legislation was finally enacted.

In any event, instead of a quick silver bullet, the various "fix-up" ideas were developed as packages and advanced at a snail's pace in several different bills through the legislative session. The initial fix-up bill -- LD 1932 -- was designed to "remove the barriers" created by a rigid cost-sharing formula the Legislature expressly wrote into the 2007 consolidation law. LD 1932 was finally killed after taking a long detour through Veto country, but was then quickly reincarnated as LD 2323, An Act to Remove Barriers to the Reorganization of School Administrative Units.

Another set of changes designed to fix the technical problems with administering the school budget validation process were in another bill, LD 2280, An Act to Clarify and Improve the Laws Governing the Formation of Regional School Units. This bill was especially designed to be enacted as "emergency legislation" so that it would be immediately effective and address the problems with administering the school budget referendums that have been mandated to take effect this spring. In order to become immediately effective law, LD 2280 would have needed to be enacted by a two-thirds "super-majority" vote in both the House and Senate.

In the final 24 hours of the session, the Legislature chose to fold LD 2280 into LD 2323, creating LD 2323 as the single consolidation fix-up bill.

The problem with this approach is that the final package was carrying too much political baggage to be enacted by a two-thirds "super-majority" vote in the House and Senate. The bill was enacted, but the legislation will not be effective until July 18, 2008.

Therefore, even though the legislation to fix the 2007 school consolidation law was ultimately enacted, there are several parts of that law that will not go into effect in time to help the town and city election clerks administer the school budget validation process this spring.

What follows is a summary of LD 2323 in its entirety. The summary is provided in two categories: (1) provisions related to the school reorganization process, which should be of interest to people serving on the "Reorganization Planning Committees"; and (2) provisions related to the school budget validation process, of special interest to election clerks. Where applicable, information is provided about the effective date of the legislation and how the effective date might impact implementation.    

Local option cost sharing. LD 2323 authorizes locally developed cost sharing agreements among the municipalities participating in the creation of a larger school district.

Repeal of 2 mill minimum. LD 2323 repeals the requirement that every municipality in a new school district must levy a property tax rate of at least 2 mills to support the school system.

Sustains minimum subsidy distribution. LD 2323 ensures that "minimum subsidy receiver" school systems will continue to receive the minimum subsidy even when merging into a larger school district.

Retains municipal ownership. LD 2323 removes the mandate that municipally-owned school property be transferred to RSU ownership.

Identification of core RSU functions. LD 2323 identifies the core functions of the Regional School Unit as: (1) employ superintendent; (2) all business functions (e.g., accounting, payroll, purchasing insurance, auditing, etc.); (3) special education administration; (4) transportation administration; (5) core curriculum development; (6) RSU-wide budget development; (7) state and federal reporting requirements; (8) system-wide employer; (9) school calendar development; and (10) development of district-wide policies.

Local control Option A. LD 2323 expressly authorizes the creation of, and identifies the rights and responsibilities of, any local school committee that may be established either as part of the plan of the Reorganization Planning Committee or by the school district board. These local school committees are provided oversight functions with respect to what were formerly municipal school systems. Specifically, the local school boards are authorized:

• To perform any duties or functions other than those reserved to the school district board (see above);
• To supplement any of the duties or functions of the district school board;
• To develop and present a proposed local school's budget to the district school board;
• To present any supplemental spending not included in the RSU-wide budget to the municipal legislative body for separate adoption;
• To oversee the municipal ownership of the local school property.

Local control Option B. LD 2323 authorizes the creation of an "Alternative Organization Structure" as an alternative type of amalgamated school administrative unit.

The Alternative Organization Structure might be an option that is attractive to school systems that are currently organized as a school union. Some newspaper accounts describe the Department of Education's Director of Communications as spinning the Alternative Organization Structure option as a very limited option that will be available to very few (and, perhaps, pre-determined) school systems statewide. Since the system presumably operates as a matter of law rather than as a matter of bureaucratic discretion, we have to assume there are objective standards that will allow all similarly organized Alternative Organization Structures to be approved and not just certain pre-chosen candidates. 

       • The Alternative Organization Structure must be developed by filing a notice of intent with the Department of Education and working through the Reorganization Planning Committee process. The same general standards that apply to the formation of Regional School Unit (e.g., number of students, the RPC process, savings requirements, DOE review and approval, voters' approval of reorganization plan, etc.) apply to the creation of an Alternative Organization Structure.

       • All the details of the Alternative Organization Structure must be created by, and organized according to, an interlocal agreement executed by and among the participating municipalities. The law cross references the interlocal agreement law found at 30-A MRSA, chapter 115.

       • In parallel to the "RSU" core functions, the Alternative Organization Structure must result in: (1) the consolidation of system administration (i.e., the superintendent's office); (2) the consolidation of special education administration, transportation administration, and administration of all business functions; (3) the adoption of a common core curriculum and standardized testing and assessment procedures; and (4) the adoption of consistent school policies and calendars, and the creation of a plan that moves toward consistent collective bargaining agreements.

       • The procedures for adopting the school budgets within the Alternative Organization Structure must be the same as the school budget adoption and validation procedures that apply to all other school systems.

Standards for approved school reorganizations serving less than 1,200 students. LD 2323 authorizes the Department of Education to approve reorganized school systems in rural isolated areas that serve less than 1,200 students provided those school systems serve at least 1,000 students and: (a) comprise at least three school systems that were separately in existence prior to July 1, 2008;  or (b) meet the so-called "doughnut hole" standard because they are surrounded by approved school systems that have not chosen to include the rural schools; or (c) include two or more schools that are eligible for the isolated small school adjustment.

The consolidation referendum ballot question. The 2007 school consolidation law requires a certain "explanation" to be included as part the local ballot to approve or reject a school reorganization proposal. The explanation language focuses exclusively on the financial penalties that will be incurred for failing to approve the school reorganization but allows no other "explanation" regarding other financial or governance implications of the proposed reorganization. From the municipal perspective, "explanation" language of this kind violates the doctrine of neutrality that applies to ballot wording. LD 2323 appropriately removes that "explanation" language from the ballot and allows the normal political process of public hearing and information exchange prior to the referendum vote to take care of "explaining" the potentially complicated impacts of any consolidation plan to the voters.

The consolidation referendum deadline. The 2007 school consolidation law required the referendum vote to approve the proposed consolidation plans to be held no later than November 4, 2008. LD 2323 extends that deadline to January 30, 2009.

Restructuring one of the penalties for failing to consolidate.  For any school system that is not a "minimum receiver", the financial penalties for failing to consolidate are: (1) a 50% reduction in the EPS allocation for system administration (which can be precisely calculated as $105 per student); and (2) a higher-than-otherwise required mill rate effort that must be levied in order to receive the school system's full school subsidy. The problem with the second penalty is that it is difficult to calculate in a timely manner and even more difficult to explain to the average voter. LD 2323 amends the mill-rate penalty to a 2%  increase the maximum mill rate effort for the non-compliant school. For example, let's suppose the maximum mill rate effort to be applied for a school year is 6.0 mills. 2% of 6.0 mills is 0.12 mill. Therefore, a  non-compliant school system's maximum mill rate effort in this example would be 6.12 mills.

Technical amendments. LD 2323 authorizes the existence and election of the RSU Board prior to the RSU's operational effective date, and other technical amendments.
School Budget Validation Referendum Procedures

Budget validation conformity. The 2007 school consolidation law carelessly set up two school budget presentation and adoption procedures, one for newly created Regional School Units (RSUs) and municipal school systems, and a different one for existing school districts (SADs and CSDs). The principal differences were that the RSU and municipal school budgets had to be presented to legislative body according to 11 separate cost centers, and the SAD and CSD budgets had to be presented according to 6 separate cost centers. The other major difference was that the RSU and municipal school budget validation referendums can be scheduled within 10 days of the open-meeting adoption of the school budget, but the SAD and CSD budget validation referendums had to be held on the third working day after the open meeting adoption of the school budget.

LD 2323 conforms SAD and CSD budget presentation and validation referendum procedures and timeframes to the "RSU" budget adoption and validation referendum process.

As mentioned above, LD 2323 will not be effective until July 18, 2008. However, LD 2323 includes what is called a "retroactivity clause" that is targeted to apply to just a couple of sections of the bill. That retroactivity clause states that the two sections of the bill that conform the SAD and CSD budget presentation and adoption procedures with the RSU process will "apply retroactively to January 1, 2008 as long as the retroactive application does not affect the validity of any budget meeting or budget validation referendum called or conducted in accordance with prior law before the effective date of this Act."

This retroactivity clause would appear to be sufficient to allow SADs and CSDs to operate under the RSU and municipal school budget presentation and adoption procedures this spring even though those procedures will not be effective law at the time.

Budget validation referendum: a single ballot question. Under the terms of the law enacted in 2007, the election clerks in municipal school systems are supposed to provide one of two possible ballots to people wishing to cast an absentee ballot at the validation referendum vote. The required wording of one possible ballot is a straightforward ballot question.

Version #1. "Do you favor approving the (name of school) budget for the upcoming school year that was adopted at the latest (insert, as appropriate, town name or school district number or name, or the name of the town or city council) school budget meeting?"  Yes….No
       The required wording of the other ballot characterizes the school budget as being greater than the EPS allocation.

Version #2. "Do you favor approving the (name of school) budget for the upcoming school year that was adopted at the latest (insert, as appropriate, town name or school district number or name, or the name of the town or city council) school budget meeting and that includes locally raised funds that exceed the required local contribution as described in the Essential Programs and Services Funding Act?  Yes…No

A YES vote allows additional funds to be raised for K-12 public education.

A NO vote means additional funds cannot be raised for K-12 public education.

One or the other of those ballots is supposed to be made available for absentee voters at least seven days before the meeting where the school budget is provisionally approved by the local legislative body. The obvious problem is that there may be no way to know which ballot to provide to the absentee voter before the legislative approval of the budget, because the local legislative body could change the proposed school budget either up or down, resulting in an election ballot that misrepresents the relationship between the provisionally-adopted budget and the school's Essential Programs and Services (EPS) allocation.

Effective on and after July 18, 2008. LD 2323 gets rid of the conflicting ballot questions and creates the single question (Version #1) that can be printed well in advance of the referendum.

For this year (before July 18th). There appear to be a couple of options depending on local circumstances.

       • Obviously over or under EPS. For some municipal school systems, it will be obvious that both the budget proposed by the school board as well as the school budget adopted by the local legislative body will be over the EPS allocation by at least some amount. The municipal clerks in that circumstance can feel comfortable using the Version #2 ballot. Although there will be fewer circumstances, it is also possible that there is a high likelihood  that both the proposed school budget and the budget provisionally adopted by the town meeting or the town or city council will be at or under the EPS allocation. In that case, the municipal clerks can feel comfortable using just the Version #1 ballot.

       • Provide both ballots.  In a municipal school unit, when the final decision of the local legislative body cannot be predicted, municipal clerks should issue both ballots, perhaps with each version printed on a different colored paper, along with instructions to the absentee voter to: (1) wait until the local legislative body adopts the school budget before submitting the absentee ballot; (2) ascertain after the budget adoption meeting whether the final budget is above or below the EPS allocation and use the correct ballot; and (3) refrain from submitting both ballots.

Budget validation referendum, ballot distribution. As indicated above, the 2007 law requires the absentee ballots for the referendum election to be distributed at least seven days before the adoption of the school budget by the local legislative body. The law then requires the election clerks to reject any absentee ballot that may be submitted before the school budget is adopted by the legislative body. It is unprecedented to issue an absentee ballot that may then be summarily rejected for being submitted too early, but that is what is required.

Effective on and after July 18, 2008. LD 2323 allows the absentee ballots to be made available no later than the day after the adoption of the school budget by the local legislative body. If the choice is made to provide the ballots before the open school budget meeting, ballots submitted prior to that date will still have to be rejected.

For this year (before July 18th). The warrant for the budget validation referendum and the ballots must be made available at least seven days before the meeting where the school budget is provisionally adopted by the local legislative body. Absentee voters will have to be carefully instructed not to submit their ballots until after the school budget is provisionally adopted.

Scheduling the referendum; absentee balloting period. The 2007 law included a convoluted sentence governing the maximum period of time between the budget adoption meeting and the validation referendum. Because of its convoluted grammar, the sentence could be read in a number of ways.

Effective on and after July 18, 2008. LD 2323 makes it clear that the referendum question must be held within 14 calendar days of the budget adoption meeting. However, the referendum may not be held on a Saturday, Sunday or legal holiday.

For this year (before July 18th). To conform to the 2007 law, the referendum must be held within 10 calendar days of the school budget adoption meeting, and may not be held on a Saturday, Sunday or legal holiday.

Committing property taxes in the event of a rejected school budget.  A significant concern on the municipal level that is associated with the mandatory school budget referendum process is the real potential that a municipality's school budget is not finally adopted by July 1. Some municipalities, and particularly the larger towns and cities, regularly commit their property taxes in July and need to commit their property taxes during that time of the year for cash-flow purposes.

LD 2323 creates an express authority for any municipality to commit its property taxes in the event the school budget is not finally adopted by July 1 of any year. If utilized, that  property tax commitment must be based on the latest school budget that was provisionally approved by the local legislative body. This option will be available to all municipalities on and after July 18, 2008.

Council line-item authority over school budget not created. Another issue of confusion generated by the 2007 school consolidation law was whether the state law provided city councils with the final authority to approve or amend the various 11 cost centers (which are essentially line items) within the proposed school budget. LD 2323 establishes that if the municipal charter provides that the town or city council (or, in a few cases, the town meeting) only has the authority to approve or amend the bottom line of the proposed school budget and has no authority to unilaterally amend various lines within the budget, then those provisions of the local charter still pertain and are not overridden by the state law. [The general rule, of course, for any open budget meeting is that the voters assembled in town meeting or in a district meeting may amend each of the proposed 11 cost centers before adoption. Unless the articles are worded in a "closed" manner to prevent amendments that would increase the proposed appropriation for any cost center, floor amendments in an open meeting can either increase or reduce the appropriation for each cost center as proposed by the school board.]